Remedies

Suppose you are an attorney acting on behalf of one of the parties to a transfer transaction, but the other party to the contract shows a marked reluctance to complete the sale. This could be for a number of reasons, for example the buyer has changed their mind about buying the property or the seller has found a buyer willing to pay significantly more. What can you do as the attorney advising the innocent party to force termination?

1. Force completion of a party you don’t want

(a) Specific Execution: This is a court order and is used against the seller when the seller refuses to execute the deed of purchase. The court has the power to order a third party to execute the deed on its behalf.

A court order for the specific performance can be requested as soon as the day set for completion has passed, whether or not time is of the essence and a notice of completion has been served or not.

It is not that useful against a helpless buyer, of course, since the court cannot force a sale where the buyer has no money.

Specific performance is a discretionary remedy. However, it is practically available by right when it comes to land due to the unique nature of any property. An applicant who is denied the decree can receive compensation for damages. Supreme Court Law, 1981 s. fifty

(b) Notice of Termination – This is a notice delivered after the date set for termination has passed without termination occurring. As long as one party is still ready and can be completed, that party can send a notice to complete the other party. The notice makes time of the essence, meaning that if there is further breach, the innocent party can withdraw entirely from the contract (such a remedy is expressly provided in standard condition (SC) 7.4 of the 5th edition of the standard conditions of the Law Society 2011). When can the notification be delivered? Under the standard conditions of sale, the completion is 20 clear days after the exchange of contracts or any other date that the contract stipulates. The open contract position if time is not of the essence and there is no stipulated end date is that notice should not be given until there has been an undue delay. If time was of the essence, the innocent party can terminate the contract immediately. However, deciding whether time is of the essence or what is an unreasonable delay is a matter of fact and therefore subject to uncertainty, which is why the open contract position should be avoided. An additional advantage of the standard conditions is that they stipulate that if the buyer has not paid a deposit when receiving a notification to complete, they must pay 10% immediately, so this provides a broader remedy and certainty about when it can be delivered the notification. . The seller often uses a notice to complete against a buyer when the specific performance is not appropriate. The threat of being sued for damages for failure to complete a notice to complete will often persuade a reluctant buyer to proceed.

2. Solutions in case of delay in completion

(a) If time is of the essence, leave.

(b) Compensation for delay

(i) The open contract position is that any delay is a breach of contract (although not necessarily one that entitles an innocent party to withdraw from the contract). The injured party is entitled to compensation, for example the cost of finding temporary accommodation. When calculating the loss, the rule is that the injured party has the right to be placed in the same position that it would be if the completion had occurred on time. Therefore, the seller would have earned interest on the purchase price and the buyer who has been deprived of occupancy can collect the same profit.

(ii) Open contract rule

– if the delay is the fault of the buyer, no monthly rent will be applied

– if the delay is the fault of the seller and the rent exceeds any interest, the buyer does not have to pay interest

(iii) Generally, however, delay compensation is covered for a term in the contract. Under SC it is recognized the fact that the party has not been able to complete due to a delay of the other in some previous stage of the transaction. Under SC7.2, the stages of the transaction as a whole are examined to determine who caused the delay and how long it was, and then the most at-fault party pays interest at the contract rate on the balance of the purchase price, either for the period of default or the delay between the completion of the contract and the actual completion if shorter. A provision is made to offset the contractual damages of any common law damages if such a claim is made or to take the rental in its place where the buyer is occupied.

(iv) Interest rate

– SC 1.1.l (e) stipulates that, unless otherwise agreed, it is the rate of the Law Society in force from time to time.

– a special condition can alter this

(v) Notice to complete – see above.

However, please also note that SC7.4 deals with the resources available to the seller due to the Buyers not complying with a notice. These include losing buyers’ deposit with interest; resell the property; and damages.

SC 7.5 deals with remedies for buyers when the seller is the one who cannot comply with a notice. The buyer can rescind and get their deposit plus interest back and still retain the right to sue for damages.

3. Reasons for terminating the contract

Rather than force termination, the innocent party may want to withdraw entirely. What are the reasons available?

(a) To terminate the contract due to a defect in its formation, for example, undue influence. This means that the parties must return to their pre-contract position. Then the buyer recovers his deposit and the seller recovers the property. Accompanied by a claim for restitution and compensation, that is, reimbursement of expenses such as aborted legal costs.

(b) Termination for Misrepresentation. If the misrepresentation was not fraudulent, the court may refuse to allow termination and award damages instead. (False Declaration Act of 1967, Article 2 (2)). The open contract position is that termination for misrepresentation can be accompanied by a claim for damages if the misrepresentation was fraudulent or negligent. Termination is still available even after termination, unless a third party has acquired rights or there has been trust and it is now impossible to restore the parties to the pre-contract position.

SC 7.1 modifies the open contract position. Only get rescission in case of misrepresentation. There must be fraud, recklessness, or obtaining property that differs substantially before it can be rescinded. Otherwise, only get damages and only if there is a material difference in value, description or content.

s.3 The False Declaration Act of 1967 makes any exclusion clause subject to a reasonableness test.

(c) Termination under a contractual law, for example, SC7 does not comply with a notice to complete or a special condition.

(d) Choose to treat the contract as terminated due to the breach of the contract by the other party. This is only possible if the offense is serious,

for example, a major misdescription

-not show a good title

-existence of an undisclosed concern

-any delay if time is of the essence -failure to comply with the termination notice.

This may be accompanied by a claim for damages for breach of contract.

4. Damages for breach of contract

Damages are calculated according to the rule of Hadley v. Baxendale, that is, the plaintiff can recover the loss that arose naturally from the breach or that was a loss that can be reasonably assumed that the parties considered at the time of the contract as the probable result of the breach.

Examples of

(a) If the termination never takes place, due to a serious breach of contract, the damages could be

For the buyer (B)

• trading loss, that is, the difference between the contract price and the highest market value on the date of default

• Transfer costs and other expenses in the purchase of a new property

• Alternative accommodation in the meantime

• possibly lost profits, for example, when P knew that B could develop a property

• If there is no loss of negotiation, then transmission costs are wasted.

For the seller (S)

• Loss of negotiation: difference between the price that would have been paid and any lower price actually achieved at resale.

• if there is no loss of negotiation, then the costs of the aborted transfer transaction

b) If completion takes place, there may still be a breach of contract that entitles a party to indemnify for damages, so that, for example, the buyer could claim a reduced purchase price if he discovers an undisclosed title or a wrong description before completion.

Generally, an action for damages for breach of contract cannot be brought after completion. However, the buyer can sue under an express provision in the contract that entitles him to compensation for misdescription, even after completion. For example, SC 7.3 and don’t forget the right to terminate under the Misrepresentation Act.

5. Confiscation of the deposit

If the default is due to a default by the seller, the buyer is entitled to a refund of the deposit and, if paid to the seller or the seller’s agent, has a link on the ground for recovery. If it is due to the default of the buyer, the seller may lose the deposit, regardless of whether he actually suffers the loss, subject to the discretion of the court to order the return of the deposit according to LPA 1925 s.49 (2). But if the seller claims damages, the lost deposit is taken into account.

6. An undisclosed charge that only comes to light after completion

(a) Title not registered only. Compensation can be obtained from the Chief Land Registrar if the buyer is adversely affected by a charge for pre-root land.

(b) An action may be subject to title covenants.